Background Papers 1 Trilateral Highway and Northeast India: Economic Linkages, Challenges and Way Forward By Prabir De, Priyadarshi Dash, and Durairaj Kumarasamy July 2020 This chapter should be cited as De, P. P. Dash and D. Kumarasamy (2020), ‘The Trilateral Highway and Northeast India: Economic Linkages, Challenges, and the Way Forward’, in The India-Myanmar-Thailand Trilateral Highway and Its Possible Eastward Extension to Lao PDR, Cambodia, and Viet Nam: Challenges and Opportunities-Background Papers. ERIA Research Project Report FY2020 no.02b, Jakarta: ERIA, pp.B1-1--46.
Transcript
Background Papers 1
Trilateral Highway and Northeast India:
Economic Linkages, Challenges and Way Forward
By Prabir De, Priyadarshi Dash, and Durairaj Kumarasamy
July 2020
This chapter should be cited as
De, P. P. Dash and D. Kumarasamy (2020), ‘The Trilateral Highway and Northeast India:
Economic Linkages, Challenges, and the Way Forward’, in The India-Myanmar-Thailand
Trilateral Highway and Its Possible Eastward Extension to Lao PDR, Cambodia, and Viet
Nam: Challenges and Opportunities-Background Papers. ERIA Research Project Report
FY2020 no.02b, Jakarta: ERIA, pp.B1-1--46.
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The Trilateral Highway and Northeast India:
Economic Linkages, Challenges, and the Way Forward
Background paper
By Prabir De, Priyadarshi Dash, and Durairaj Kumarasamy
1. Introduction
The North Eastern Region of India (NER), consisting of the states of Arunachal Pradesh, Assam,
Manipur, Meghalaya, Mizoram, Nagaland, Tripura and Sikkim (Figure 1), is India’s natural resource
powerhouse. The region is endowed with not only vast natural resources, such as oil, natural gas and
hydropower, but also agro-climatic conditions that help the region to grow some of the country’s
best agro-forestry products. A well-educated labour force, relatively high literacy rate, and access to
clean water are some of its unique strengths over other Indian states. The NER is also surrounded by
an international border, serving as India’s gateway to the east. Against these strengths, there are
weaknesses and threats that emanate to a large extent from the difficult terrain of the region and
inadequate infrastructure.1 These pose some of the greatest constraints to economic growth,
thereby nullifying the NER’s border advantage. Transport and logistics bottlenecks have long been
identified as serious constraints to the growth of the NER.2
Figure 1: North Eastern Region of India
Source: Maps of India (www.mapsofindia.com).
1 See, for example, Sarma and Bezbaruah (2009). 2 See, for example, De (2011), Brunner (2010), RIS (2012a), and De and Kunaka (2019), to mention a few.
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Overall, trade and transportation infrastructure in the NER is dominated by the distribution of goods
and products that are sourced mostly from the rest of India. The region lags behind the rest of India
in the pace of economic growth and has a relatively small regional market.3 Trade has special
significance for the economies of the NER states. However, the region’s growth potential is
considerably high due to its geographical proximity to the growing Southeast and East Asian
markets. Given its geographical location, an enhanced engagement with the Association of
Southeast Asian Nations (ASEAN) under the Act East Policy (AEP) may generate new economic
opportunities, thereby fuelling growth in the NER, ceteris paribus.4
The NER is central to the AEP. The AEP is designed to provide economic opportunities to the NER to
benefit from its vast border and vibrant neighbours. The NER’s value chain potential can be unlocked
if border infrastructure and transportation networks, in particular, are improved.5 In other words,
improvements in the border infrastructure coupled with enhanced transportation networks with
Southeast Asia may provide new economic opportunities to the NER.6
To strengthen the connectivity between India and ASEAN, the Trilateral Highway (TLH) between
India, Myanmar, and Thailand is being developed, and there is a plan to extend the TLH to
Cambodia, the Lao People’s Democratic Republic (Lao PDR), and Viet Nam.7 Completion of the TLH is
likely to facilitate faster movement of goods and people between India and ASEAN8 and add growth
impetus to the NER.9
The aim of this study is to shed light on the economic principles underlying the NER market and to
offer new ideas on how its potential can be better exploited in view of the TLH development. As the
NER will be at the forefront of the TLH on the Indian side, this study aims to assess the status of the
economic linkages of the NER, identify the constraints behind and at the India–Myanmar border, and
recommend policy measures to augment the linkages between the NER and Southeast Asia. This
study also reviews the institutional arrangements and identifies key elements that may hinder the
movement of goods and people across the India–Myanmar border along the TLH.
The rest of the study is organised as follows. Section 2 discusses the rationale for an integration
synergy for the NER, followed by a presentation of the trade scenario between India and Myanmar
with particular focus on the NER in Section 3. Section 4 reviews the physical and institutional
infrastructures profile of the NER in view of current and envisaged infrastructure linkages between
the NER and Myanmar. Section 5 then discusses the developmental impact of the Trilateral Highway
on the NER. Challenges to development and integration are then briefed in Section 6 along with a set
of recommendations. Finally, Section 7 concludes.
3 The total population is around 46 million (2011 census), with 70% living in Assam alone. 4 See, for example, Kathuria and Mathur (2019) 5 See De and Majumdar (2014), Singh (2020), and Das (2020). 6 See, for example, Sarma and Choudhury (2018). 7 At the ASEAN–India Informal Breakfast Summit on 15 November 2018, the Leaders welcomed India’s proposal for a study by the Economic Research Institute for ASEAN and East Asia (ERIA) on developing an economic corridor along the TH and the feasibility of its extension to Cambodia, the Lao PDR and Viet Nam. See https://asean.org/chairmans-statement-asean-india-informal-breakfast-summit/. 8 See Kimura and Umezaki (2011), Kumagai and Isono (2011), and De (2016), to mention a few. 9 See, for example, De et al. (2019).
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2. Rationale of an Integration Synergy for the NER
The NER is a US$43 billion economy, contributing about 2% to Indian GDP. Assam is the largest
economy in the NER; the state alone contributes 57% of the NER’s gross domestic product (GDP)
(Table 1). Services are the mainstay of the economies of the NER states, accounting for 62% of the
region’s GDP and comprising a major source of employment and livelihood in the region. Except for
Sikkim, the remaining NER states are services-driven, which is very much consistent with the
national trend. The agriculture sector contributes almost 27% to the NER’s GDP, which is another
lifeline to the region’s economy.
In contrast, industry has a small share (10%) in the NER’s economy. The existing industries of the
NER include coke and refined petroleum products, food products, and a range of manufactured
products including wood, furniture, beverages, pharmaceuticals, metal products, rubber, and
plastics products.10 Industries requiring large-scale production, such as petrochemicals, cement,
steel, and sugar, are not present despite the fact that the region is a rich source of the basic raw
materials required as inputs for such industries.
Table 1: Economic Profile of the NER
State
Per Capita
NSDP$
(2017–18)
NSDP$
(2017–18)
Share of GSDP# Annualised Growth
Rate of NGDP
(2011–12 to
2017–18)
Agriculture Industry Services
US$ US$ billion % %
Arunachal
Pradesh 1,528.0 2.29 38.84 3.78 57.37 6.7
Assam* 781.5 24.45 30.68 14.60 54.72 6.2
Manipur 784.9 2.48 16.78 3.44 79.78 5.9
Meghalaya 989.1 2.91 27.25 6.89 65.86 1.6
Mizoram 1,590.6 1.87 29.97 0.86 69.18 10.6
Nagaland* 947.8 1.94 29.69 1.57 68.73 4.7
Sikkim 3,073.9 2.10 7.80 48.05 44.13 6.2
Tripura 2,151.2 4.84 37.11 5.57 57.32 10.6
NER** 1,480.88 42.88^ 27.27 10.10 62.14 6.5
India 1533.8 2,018.60 20.29 17.84 61.87 6.7
Notes: GSDP = gross state domestic product; NSPD = net state domestic product. *Values for 2016–17; # share of GSDP is based on 2016–17; $ taken at constant price at base 2011–12; ** simple average of eight NER states as applicable; ^ total of NER states. Source: Calculated based on the Economic Survey of India, Ministry of Finance, Government of India; and The Handbook of Indian Economy, Reserve Bank of India
10 Based on NEC Databank.
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Figure 2: Per Capita Income vs. Infrastructure Development, 2016–17
Source: Authors’ own based on the Handbook of Indian Economy, Reserve Bank of India; and National Highway Authority of India (NHAI).
The per capita income of most of the NER states is relatively higher than the average for other Indian
states, except Mizoram, Sikkim, and Tripura (Table 1).11 In terms of per capita income, Sikkim is the
richest state in the NER, followed by Tripura and Mizoram. The economic growth rates of most of
the NER states are growing close to the average growth rate of other Indian states, except Mizoram
and Tripura. Today, the rise in construction of public utilities in the NER is, thus, a manifestation of
the NER’s growth. The region is presently seeing the construction of roads and highways, bridges,
railways, airports, land port, and many other such projects.12
However, the NER suffers from infrastructure deficits. The region requires more quality
infrastructure, both physical and social. A high level of infrastructure investment is a precursor to
economic growth.13 The scatter diagram in Figure 1 shows a positive association between road
density and per capita income amongst the Indian states, thereby suggesting enormous scope for
further improving the income level of Indian states with higher capital accumulation. At the same
time, the NER lags behind other Indian states in terms of technological progress and capital
accumulation, which are essential for growth and development. The NER’s capital accumulation base
is abysmally low, and technological progress is rather slow. Infrastructure investment is, therefore,
needed not only to build the national infrastructure but also to strengthen its capital accumulation.14
11 The data are based on per capita NSDP in US dollars at the current price for the year 2017–18. 12 See, for example, NITI Aayog (2018). 13 See, Barro (1990), for example. 14 Several studies argue that the NER needs major improvements in its border infrastructure, particularly to facilitate trade and investment with Bangladesh and Myanmar. See, for example, Das and Purkaystha (2010), RIS (2012a, 2012b), De and Ray (2013), De and Majumdar (2014), Dutta (2015), and Das (2020).
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Figure 3: Removing Economic Isolation: Development Cycles for the NER
Source: De and Majumdar (2014).
From the supply side, strengthening the NER’s current level of trade and economic linkages with the
neighbouring countries would need infrastructure and institutional support, which gradually will
facilitate growth and remove the region from economic isolation (Figure 2). Investment in physical
and institutional infrastructure may augment production, both within and across borders, and
enhance the growth of the region.
Considering the above, building infrastructure networks, such as the TLH and its potential extension
to the Mekong subregion, may facilitate trade and integration between India and Mekong (CLMV-T)
countries. Synergy between them may enable them to realise the benefits of economic integration
and generate new growth potential for the NER.
Building of infrastructure & institutions
Rise in production & consumption
Rise in international
trade
Rise in economic
growth
Rise in per capita
income
Rise in demand
Rise in production
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3. India’s Trade with Myanmar: Trends and the Changing Profile
Trade has special significance for the NER’s states. The NER’s border is 98%, international with
neighbouring countries like China, Bhutan, Myanmar, and Bangladesh (Table 2). Myanmar shares a
1,643 km international border with the NER in the states of Arunachal Pradesh (520 km), Manipur
(389 km), Mizoram (510 km), and Nagaland (215 km). India and Bangladesh share 4,091 km of
international borders, out of which the NER’s share is almost 1,880 km (wherein 1,434 km is land
border and 446 km is riverine tract). Four NER states, Assam, Meghalaya, Tripura and Mizoram, have
international borders with Bangladesh. The NER conducts border trade with Bangladesh, through
multiple land custom stations (LCSs), and also with other neighbouring countries such as Bhutan,
Nepal, China and Myanmar, respectively (Figure 4). However, a large part of the NER’s international
border with Bangladesh is porous.
Table 2: Length of International Borders of NER States (km)
State/Country Bangladesh Bhutan China Myanmar Nepal Total
Arunachal
Pradesh - 217 1,080 520 - 1,817
Assam 263 267 - - 530
Manipur - - - 389 -- 398
Meghalaya 443 - - - 443
Mizoram 318 - - 510 - 828
Nagaland - - - 215 - 215
Sikkim - 32 220 - 97.8 350
Tripura 856 - - - - 856
Total 1,880 516 1,300 1,643 97.8 -
Source: Ministry of Development of North Eastern Region, Government of India.
Figure 4: NER’s Border Posts with Neighbouring Countries
Note: Indian-side Land Custom Station (LCS); Neighbouring country-side LCS. Refer to Appendix 1 for the list of border posts. Source: ASEAN–India Centre (AIC), RIS.
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Although four NER states share an international border with Myanmar, border trade with Myanmar
only happens through Moreh in Manipur and Zokhawthar in Mizoram. The India–Myanmar Border
Trade Agreement was signed on 21 January 1994, and trade started through the LCSs of Moreh in
Manipur, Zokhawthar in Mizoram, and Nampong in Arunachal Pradesh. Out of the three LCSs, only
Moreh and Zokhawthar are functional border posts. Border trade through Moreh in Manipur (India)
to Tamu in Myanmar was formally started on 12 April 1995, while border trade through Zokhawthar
in Mizoram began operating on 30 January 2004, with a new LCS built by the Border Roads
Organisation (BRO) on 14 September 2007.
3.1 Trends in Bilateral Trade
India and Myanmar signed a trade agreement in 1970. Myanmar is India’s FTA partner in ASEAN. In
addition, India offers duty-free and quota-free market access to Myanmar. Bilateral trade between
them has grown steadily and reached US$2.17 billion in 2016 (Figure 3). India’s introduction of
quotas on pulses imports and hikes in duty prices of about 40% on imports of betel nuts from
Myanmar led to a decline in India’s formal imports from Myanmar from 2016 onwards. Myanmar
maintained a trade surplus with India until 2015, which turned into a trade deficit thereafter.
Figure 5: India’s Exports to and Imports from Myanmar
Source: Export–Import Databank, Government of India.
Notwithstanding the decline of bilateral trade in recent years, both India and Myanmar have
significantly increased their exchange of goods. For instance, India has significantly increased its
number of products exported to Myanmar from 1,122 in 2010–11 to 2,469 in 2018–19, showing a
rise of 10.63% per annum between 2010–11 and 2018–19. Similarly, Myanmar has almost doubled
the number of products exported to India from 159 in 2010–11 to 313 in 2018–19 (Figure 4). This
suggests higher consumer confidence in the economies, thereby opening further scope for trade
creation between the two countries.
The rising merchandise trade between the two countries also indicates that India’s exports to
Myanmar are relatively well-diversified, whereas India’s imports from Myanmar are concentrated
amongst a few products. India’s exports to Myanmar at the HS 2-digit level primarily includes
pharmaceuticals, iron and steel, electrical equipment, sugars and sugar confectionery, minerals,
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machinery and mechanical appliances, cotton, and food processing, amongst others, which together
accounted for about 84% of India’s total exports to Myanmar in 2017–18 (Table 3). On the other,
India’s imports from Myanmar at the HS 2-digit level are edible vegetables, roots and tubers, wood
and wood products, iron and steel, lead articles, coffee and tea, seafoods, medicinal seeds and
plants, and rubber, amongst others, which together accounted for about 99% of India’s total imports
from Myanmar in 2017–18 (Table 4). Most of the bilateral trade is, however, routed through the
ocean.
Figure 6: Number of Products Traded in India’s Exports to and
Imports from Myanmar (at the HS 8-digit level)
Source: Export–Import Databank, Government of India.
1122
2469
159313
2010-11 2018-19 2010-11 2018-19
India's Exports to Myanmar India's Imports from Myanmar
No. of Products (at HS 8 digit)
8.83 %
10.63 % Annualised Growth rate (2010-11 and 2018-
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Table 3: India’s Major Commodity Exports to Myanmar (at the HS 2-digit level)
HS
Code Commodity
2018–
2019 (US$
million)
Share in
2018–19,
%
CAGR
(2010–11 to
2018–19), %
30 Pharmaceutical Products 199.67 16.56 15.76
27
Mineral Fuels, Mineral Oils and Products of
Their Distillation; Bituminous Substances;
Mineral Waxes 198.29 16.45 68.03
17 Sugars and Sugar Confectionery 126.12 10.46 25.10
2 Meat and Edible Meat Offal 124.11 10.29 7.14
87 Vehicles Other Than Railway or Tramway Rolling
Stock, and Parts and Accessories Thereof 71.67 5.94 37.53
85
Electrical Machinery and Equipment and Parts
Thereof; Sound Recorders and Reproducers,
Television Image and Sound Recorders and
Reproducers, and Parts 61.86 5.13 17.63
84 Nuclear Reactors, Boilers, Machinery and
Mechanical Appliances; Parts Thereof 55.91 4.64 14.00
23 Residues and Waste from the Food Industries;
Prepared Animal Fodder 46.66 3.87 13.65
52 Cotton 46.49 3.86 22.18
5 Products of Animal Origin, Not Elsewhere
Specified or Included 26.94 2.23 34.54
72 Iron and Steel 23.95 1.99 1.21
61 Articles of Apparel and Clothing Accessories,
Knitted or Crocheted 21.03 1.74 34.03
39 Plastic and Articles Thereof 16 1.33 13.31
73 Articles of Iron or Steel 15.62 1.30 8.01
Source: Export–Import Databank, Government of India.
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Table 4: India’s Major Commodity Imports from Myanmar (at the HS 2-digit level)
HS
Code Commodity
2018–19
(US$
million)
Share in
2018–19,
%
CAGR (2010–
11 to 2018–
19), %
7 Edible Vegetables and Certain Roots and Tubers 370.43 71.03 -5.26
44 Wood and Articles of Wood; Wood Charcoal 92.25 17.69 -17.24
79 Zinc and Articles Thereof 12.05 2.31 -
72 Iron and Steel 8.86 1.70 -
40 Rubber and Articles Thereof 6.07 1.16 11.40
12
Oil Seeds and Olea. Fruits; Misc. Grains, Seeds
and Fruit; Industrial or Medicinal Plants; Straw
and Fodder 5.76 1.10 36.79
9 Coffee, Tea, Mate, and Spices 5.23 1.00 7.47
3 Fish and Crustaceans, Molluscs and Other
Aquatic Invertebrates 4.08 0.78 57.09
76 Aluminium and Articles Thereof 3.94 0.76 77.49
41 Raw Hides and Skins (Other Than Fur Skins) and
Leather 2.16 0.41 -8.89
62 Articles of Apparel and Clothing Accessories,
Not Knitted or Crocheted 1.45 0.28 -
61 Articles of Apparel and Clothing Accessories,
Knitted or Crocheted 1.4 0.27 -
64 Footwear, Gaiters and the Like; Parts of Such
Articles 1.25 0.24 -
51 Wool, Fine, or Coarse Animal Hair, Horsehair
Yarn and Woven Fabric 0.96 0.18 -
26 Ores, Slag, and Ash 0.91 0.17 21.63
87 Vehicles Other Than Railway or Tramway Rolling
Stock, and Parts and Accessories Thereof 0.75 0.14 49.53
84 Nuclear Reactors, Boilers, Machinery and
Mechanical Appliances; Parts Thereof 0.67 0.13 35.20
721049 Flat-rolled products of iron or non-alloy steel, of
a width of >= 600 mm, hot-rolled or cold-rolled 0.38 10.7
850421 Liquid dielectric transformers, having a power
handling capacity <= 650 kVA 0.22 9.3
Source: ITC.
Overall, India’s total export potential was about US$1.45 billion in 2018, compared to India’s actual
exports of US$1.23 billion to Myanmar. India has export potential in sectors such as automobiles,
pharmaceuticals, food processing items, mineral products, and iron and steel (Table 5). This unmet
potential may offer new business opportunities, provided the barriers to trade are removed.
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Comparing the major exports and imports between India and Myanmar, there are very few products
that are traded through the land borders of India and Myanmar. Border trade potential between
India and Myanmar is yet to be unlocked. Myanmar is the entry/exit point to and from ASEAN.
Therefore, the completion of the TLH may generate new demand for trade through the land border,
particularly via Moreh and Tamu.
Trade improves the social and economic conditions of the people who are directly participating in
the trade.15 To boost exports from the NER in general and Manipur in particular, the northeastern
states have to create adequate infrastructure for the promotion of export-oriented units and a
business environment that facilitates cross-border linkages. For instance, some of the small and
medium-sized enterprises (SMEs) located in and around Imphal city engaging in production activities
such as for PVC pipes, plastics, garments, processed foods, electrical, etc. also export to Myanmar
through the Moreh Integrated Check Post (ICP). Local industries may switch over to the land border
for their trade with overseas partners once the TLH is completed. Therefore, assessing the current
profile of border trade between India and Myanmar is important in order to make an appropriate
strategy-driven connectivity programme for stimulating regional development in the NER.
3.2 Trade and Movement of Passengers at the India–Myanmar Border
Border trade started operating between the two countries in 1969. From 1990 to 1992, only Indian
goods were exported to Myanmar. There were no exports coming from Myanmar to India. In 1992,
legal trade based on barter systems on locally produced items within the radius of 40 km on either
side of the border started between the two countries and continued till 2006. The agreement
initially allowed 22 items to be traded under this system in 1995 (Table 6) with the mandate that
imports and exports had to be balanced by exporting/importing goods of equivalent value within six
months. Both exporters and importers trading up to US$20,000 had to produce an Importer Exporter
Certificate from the Director General of Foreign Trade (DGFT), and complete Guarantee Receipt (GR)
formalities (required only if the value exceeded US$1,000 and by way of head-load cargoes or a non-
motorized transport system).16 In addition, 18 more items in 2008 and 22 items in 2012 were added
to the list of tradable items for border trade (Table 6). Since 2015, formal trade based on the most-
favoured-nation principle started between the two countries. Even though normal trade started at
the border, no duty drawbacks or trade preferences were extended to traders at the border.
15 There is plenty of literature to show the relation between trade and poverty linkages. See, for example, World Bank (2018). 16 See Kshetrimayum (2010) for more details.
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Table 6: Number of Permitted Items for Border Trade between India and Myanmar
Sr. No. Old and Additional Items Permitted for Border Trade
1 A total of 22 commodities/items notified by DGFT Public Notice No. 289(PN)/92-
water tanks, buckets, chairs, plastic pipes and briefcase, 17. Rice, wheat, maize,
millets and oats, 18. Scented tobacco, 19.Semi-precious stones, 20. Sewing
machines, 21. Textile fabrics, 22. Two/three wheelers/cars below 100 CC.
Source: Authors, based on secondary sources.
The border trade between India and Myanmar has increased significantly since 2005 (Figure 7(a)).
However, the bilateral border trade volume between India and Myanmar is not substantial when
compared with Myanmar’s border trade with China or Thailand (see Figure 7(b)).17 The bilateral
border trade volume may go up if we factor in the volume of informal trade between India and
Myanmar. A substantial part of the bilateral trade at the Moreh–Tamu border is carried out
informally. In the formal sector, Myanmar’s exports to India through the Tamu border have
increased from US$11.28 million in 2005–06 to US$177.20 million in 2018–19. Meanwhile, India’s
exports to Myanmar through Moreh have increased from US$4 million in 2005–06 to only US$23.45
million in 2018–19. India’s major exports to Myanmar through Moreh are high-speed diesel,
wallpaper, wheat flour, methyl bromide, and fertiliser; whereas, India’s major imports from
Myanmar through Moreh are betel nuts, fresh vegetables, and fruits18 (Table 7).
17 See Annexe 2 for port trade and the growth in total trade between 2015 and 2018. 18 Exports through the ICP in 2018–2019: (i) February 2019: pesticides (methyl bromide), one cargo of 5,000 kg, US$36,600; (ii) March 2019: wallpaper, one consignment of 940 kg, US$37,000; and (iii) April 2019: High-speed diesel, 16.95 metric tons, US$11,230
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Figure 7(a): India–Myanmar Border Trade at the Moreh–Tamu Border
Source: Embassy of India, Yangon (from 2005–06 onwards) and 2018–19 data from Myanmar Customs, Ministry of Commerce, Myanmar.
Figure 7(b): Myanmar’s Border Trade with Neighbouring Countries (US$ million)
Note: China: Muse, Lwejel, Chin Shwehaw, Kanpitetee, Kyaing Tong; Thailand: Tarchileik, Myawaddy, Mawtaung, Mese; India: Tamu and Rhi and Coastal Areas: Nabulae/Htee Khee, Mawtaung, Mese, Sittwe, Maung Daw. Source: Ministry of Commerce, Government of Myanmar.
Table 7: Major Commodities Traded between India and Myanmar via the Land Border
India’s Exports to Myanmar India’s Imports from Myanmar
High-speed diesel, wheat flour, wallpaper,
methyl bromide, fertiliser, soya bean meal,
pharmaceuticals, motorbikes, non-alloy
steel, oil cakes, cotton yarn and auto parts
Betel nuts, dry ginger, green mung beans,
turmeric roots, ginger, saffron, bay leaves,
medicinal herbs, fresh vegetables and fruits,
fishery items
Note: Data collected during January–December 2019. Source: RIS Survey (2019).
11,28 8,30
53,03
177,20
4,13 4,50
18,62 23,45
0
50
100
150
200
2005-2006 2010-2011 2015-2016 2018-2019
Myanmar exports to India Myanmar Imports from IndiaU
Note: Data are on imports through official routes. Source: Export–Import Databank, Government of India.
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Myanmar’s exports to India do not pay any export duty for those items that are allowed to be
exported to India. However, some of Myanmar’s exports pay 2% duty to the Myanmar government.
At present, 13 items are not allowed to be exported from Myanmar to India, and three items are not
allowed to be imported from India to Myanmar. Out of the 10,000 tariff line export products, only
3,500 tariff line products need an export license. On the other hand, only 4,800 tariff line products
need an import license. The rest of the products do not require any license and can be exported and
imported without major documentation or compliance. The Tamu Chamber of Commerce is the
nodal agency involved in facilitating Myanmar’s trade with India through the Tamu border.
The major export item from Myanmar to India is primarily betel nuts (Table 9). Myanmar, being a
least developed country (LDC), receives duty-free quota market access from India. However, India
has raised the import duty on betel nuts from 0% to 40%. As a result, imports of betel nuts from
Myanmar to India through formal channels has considerably fallen from US$1067.25 million in
2016–17 to US$457 million in 2018–19. However, this has encouraged the rise of informal trade of
betel nuts through the land border.19
A major disadvantage to border trade is the lack of trade complementarities between India’s NER
and Myanmar. Both regions share very similar economic structures, where agriculture and resource
extraction dominate. Northeast India produces mainly tea, coal, limestone, fruits and vegetables,
etc. and lacks the industrial capacity to produce the manufactured goods that Myanmar needs.20
This suggests that most of the border trade consists of informal trade (third-country goods), which
brings arguably lower economic benefits to the region. Additionally, the overland route carries high
transaction costs, which make it a far less desirable option compared to ocean transport.21
3.3 Passenger Movement between India and Myanmar through Moreh
Passenger movement through the Tamu and Moreh border has increased considerably over the
last few years (Figure 8a). The passenger movement has picked up since the border was opened
for passenger movement between the two countries at Moreh and Tamu on 8 August 2018.22 The
monthly passenger movement between Tamu and Moreh has increased significantly from about
200 in August 2018 to 800 in March 2019 (Figure 8b). Passenger movement at Moreh declined in
2019–20 compared to 2018–19. About 40–45% of annual visas have been issued by the Indian
Missions in Myanmar to Myanmar nationals only to travel to India through the land border. Most
of the Myanmar nationals visit India for the purposes of business, tourism, pilgrimage, medical,
etc. Medical tourism between the two countries has been successful (e.g. the case of Shija Hospital
in Imphal). People from Manipur, on the other hand, would like to visit Myanmar for the purposes
of culture, tourism, business, etc. For Myanmar nationals, travel to India via Tamu is relatively
cheaper. The movement of people via the Tamu border has gone up, particularly after the opening
of the ICP at Moreh.
19 Indian Customs claim that betel nut consignments that enter into India through Moreh are not necessarily of Myanmar origin. While Indian Customs insist on COO for imports of betel nuts, the Myanmar authority at Tamu claims that the green betel nut variety is produced in Kalay town in Sagaing region and areas along the Chindwin River (RIS Survey, 2019). 20 See, for example, Nath (2018). 21 See, for example, Chong (2018). 22 This benefit was also extended to all other border points across Myanmar. Third-country nationals with valid visas can enter and/or exit from any land border post that has been notified by Myanmar.
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Figure 8(a): Passenger Movement at the Moreh–Tamu Border
Figure 8(b): Passenger Movement at the Moreh–Tamu Border
Source: RIS Survey based on the Land Port Authority of India (LPAI), Government of India.
public conveniences, and a monumental national flag. The current status of the facilities at ICP
Moreh is given in Table 10.
LCS Moreh is housed in a departmental building located near Gate No. 1 but is under consideration
to be shifted to the ICP complex. Plant and quarantine facilities are available at LCS Moreh. However,
the plant and quarantine facilities are yet to be used. Moreh and Tamu border posts should be kept
open 24/7 for trade and tourism purposes.
4.2 Financial Infrastructure
Four banks are currently operating in Moreh: State Bank of India (SBI), United Bank of India (UBI),
UCO Bank, and Axis Bank. These four banks mostly cater to the demand for banking and other
financial services. The four banks have one ATM each placed in different locations of Moreh town.
Amongst the four, UBI is the officially designated foreign exchange dealer in Moreh. Banking and
financial transactions are substantial, taking into account the level of economic activities in Moreh
and the reported border trade taking place between the two countries through the Moreh–Tamu
border.
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Based on preliminary sources, the current average daily deposits of SBI and UBI are to the tune of
between Rs4–5 million and Rs10 million, respectively. SBI has approximately 7,000 savings accounts
and 300 current accounts, whereas UBI maintains 8,000 savings accounts and 300 current accounts.
In the case of border trade, no special payment arrangement, including a letter of credit, exists
between India and Myanmar. Although there is no provision of a letter of credit, trade-related
transactions, which are mostly conducted through current accounts, constitute a substantial part of
the banking business in Moreh. The RIS Survey (2019) found that around 90% of the total deposit
mobilisation of UBI per day (approximately Rs9 million) is linked to border trade. Likewise, current
account transactions of SBI are approximately Rs3–4 million per day.
Banks operating in Moreh expect that local business and trade will grow once the Trilateral Highway
(TLH) becomes operational. While the need for more human resources is often highlighted, with
technological modernisation and proper clearing and settlement mechanisms, the banks would be
able to handle the possible rise in demand for financial services associated with higher border trade.
Banks also provide financing to local traders and businesses along with mandated commitments of
priority sector lending and Micro Units Development and Refinance Agency (MUDRA) loans.26 Loans
extended by SBI are approximately Rs170 million, and about 100 SMEs are financed by the bank.
Similarly, UBI has provided 300 MUDRA loans, mostly for the purpose of variety stores/shops. While
the lending portfolio of UBI has grown over the years, the bank does not have any large exposure to
a single borrower, thereby reducing the cumulative risk of default.
In the case of trade-linked banking services, both SBI and UBI are considering the proposal of
opening extension counters at ICP Moreh, especially for foreign exchange-related services. Both SBI
and UBI underscore the importance of improving the trade environment in the Imphal–Moreh
region and suggest a number of policy and institutional reforms. As informal trade with Myanmar
through Moreh continues to remain a challenge, banks believe in positive outcomes of incentives,
like bank guarantees, letters of credit, faster payment settlement, bilateral banking arrangements,
rupee trade, and so on. In particular, UBI is keen to provide bank guarantees for local traders
engaged in border trade. Since foreign exchange transactions are likely to increase in the future, UBI
needs proper technology for validating the foreign currency notes as the risk of fake currency
circulation is high. Despite being the official dealer of foreign exchange, the bank does not sell any
foreign currency to the traders. The customers and traders are only allowed to convert foreign
currencies to the Indian rupee.
Summary
There are several challenges, including shortages of staff, lack of electricity, lack of good-quality
internet, absence of accommodation for officials, and other social infrastructure. At the moment,
only the passenger terminal has been opened. Moreh ICP has started accepting people coming from
Myanmar to India and vice versa. The cargo terminal is not yet ready. However, construction is in the
final stage. The biggest challenge is bank transfers. Trade does not happen through a bank Letter of
26 MUDRA is a refinancing Institution. MUDRA does not lend directly to micro-entrepreneurs/individuals. Mudra loans under Pradhan Mantri Mudra Yojana (PMMY) can be availed from nearby branch offices of a bank, NBFC, MFIs, etc.
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Credit (LC). There must be a formal banking facility. Transactions between the two countries should
follow the LC system.
The Government of India may extend a transport subsidy to the exporters located in Imphal and
Moreh. This subsidy would help them to compete with bigger exporters who are not from the
region.
The Sagaing province of Myanmar is a big market for Indian goods. Greater cooperation to promote
trade and investment is needed between Manipur and Sagaing. Completion of the construction of
the TLH and the replacement of bridges will strengthen the trade and investment linkages between
India and Myanmar.
Tourism is another potential for business and is yet to be unlocked. People from Myanmar would
like to travel to Bodh Gaya. They can cross the border at Moreh and reach Imphal, then take a flight
for Kolkata or Guwahati for their onward journey to Patna or Bodh Gaya. The Manipur government
may also consider setting up a guest house for Buddhist travellers.
Greater linkages between SMEs in the two countries, particularly in the border areas, will pave the
way for higher trade and value chains. Some potential exporters have been SMEs, which can do
business between the two countries in the areas of processed foods, automobiles, steel items,
textiles, and apparel, etc.
E-visas are yet to be accepted at the Moreh border by Indian Immigration. However, the border pass
is pending from the Indian side, whereas the Myanmar side has already started the border pass.
An electronic mode of trade, instead of a manual system, must be introduced. India–Myanmar trade
can also be conducted in the local currencies (rupee-kyat).
In view of international trade at Moreh and Tamu, food safety should be strengthened, both at the
Moreh border and Imphal. The activities of the Food Safety and Standard Authority of India (FSSAI)
are managed by the Manipur State Food Safety Department. All the laboratories under the FSSAI
should be National Accreditation Board for Testing and Calibration Laboratories (NABL) certified. A
microbiology section of the FSSAI Lab is not yet developed. A small office opened in Moreh last
December 2018 to check the chemicals in processed food items. However, this office is now closed.
FSSAI Manipur office is issuing NABL certificates from time to time.
A Joint Task Force between India and Myanmar should be created, and a Joint Trade Committee
could be set up to give support to trade and connectivity.
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5. The Trilateral Highway and Its Extension to Cambodia, the Lao PDR, and
Viet Nam
Enhancing connectivity between ASEAN and India is a major thrust of ASEAN’s Master Plan on
ASEAN Connectivity 2025 and India’s Act East Policy. In order to foster regional cooperation and
integration through deeper economic relations and people-to-people linkages, it is important to
establish well-designed connectivity in the region by developing strategies to enhance economic,
industrial, and trade relations between ASEAN and India. The current foundations of ASEAN–India
connectivity are required to be updated and synced with the progress in physical connectivity within
ASEAN, and between India and ASEAN. In this context, the ongoing connectivity project of the TLH
between India, Myanmar, and Thailand and the proposed extension of the TLH towards Cambodia,
the Lao PDR, and Viet Nam (CLV) would enable an increased exchange of goods, services, and the
movement of people between India and ASEAN. Besides, connecting India’s NER with Southeast Asia
would contribute to higher trade and investment, strengthen regional value chains, create jobs, and
increase people-to-people contact, amongst others, and the NER would further strengthen the
relationship with Myanmar for enhancing ASEAN–India connectivity.
5.1 Trilateral Highway
The Trilateral Highway (TLH) is aimed to build connectivity from Moreh in India to Mae Sot in
Thailand via Myanmar (Figure 11). The India–Myanmar–Thailand TLH project involves the
construction of a 1,360 km highway connecting Moreh in Manipur to Mae Sot in Thailand through
Myanmar. The cost of the construction of the Trilateral Highway is estimated at US$140 million. The
TLH road is further proposed to be extended to Cambodia, Lao PDR, and Viet Nam.
Figure 11: Trilateral Highway and Its Extension
Source: ASEAN–India Centre at RIS.
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5.2 Tamu–Kalewa–Kalemyo Road
The Tamu–Kalewa–Kalemyo road, or the India–Myanmar Friendship Road, was inaugurated in 2001.
The road, built entirely by India, was a gift to Myanmar and is a part of the Asian Highway. The
Tamu–Kalewa–Kalemyo Friendship Road has been built by the Border Roads Organisations (BRO)
and was transferred to the Government of Myanmar in 2009. The related agreements between India
and Myanmar suggest that India would widen and repave the existing roads in the area, while
Myanmar would upgrade the single-lane bridges along the route. Myanmar, however, was unable to
carry out the upgrading work. In 2012, India agreed to repave the existing highway and upgrade all
70 weak/vintage bridges along the road, of which only one has been repaired by Myanmar till date.
The construction of the remaining 69 bridges in the Tamu–Kyigone–Kalewa section (149.70 km) of
the highway and upgrading the Kalewa–Yagyi section (120.74 km) are being undertaken by India. It is
a part of the Trilateral Highway, which is likely to be completed by May 2021. The route of the TLH is
as follows (Figure 12): Moreh (India)– Tamu–Kalewa–Yargi–Monywa–Mandalay–Meiktila bypass–
The Government of India and ADB signed a US$125.2 million loan that has been used to upgrade the
roads in northeast India. National Highway and Infrastructure Development Corporation Limited
(NHIDCL) is implementing the ADB-funded highway project between Imphal and Moreh. The total
estimated cost is Rs11.88 billion. About US$160 million is the loan agreement amount between ADB
and the Government of India. The length of the road (NH 102, which was previously known as NH31)
is 110 km. Construction of the first phase (Point 330 to Point 350) is under the tendering process.
Construction of the second phase (Point 350 to Point 395) is undergoing construction. For the
construction of the third phase (Point 395 – Moreh Border), the loan has not yet been sanctioned.
The construction of the second phase is likely to be completed by October 2021, whereas the first
and third phases are likely to be completed by 2022. Gurgaon-based GR Infrastructure has been
awarded the construction of the second phase of the highway.
Figure 13: Project Status of the Imphal–Moreh Highway
Source: RIS Survey (2019).
There are issues regarding the ongoing construction of the project; for example, land acquisition in
some of the places between Imphal and Pallel. Another example is the old bridge (known as Lilong
Bridge), which is a single lane at Lilong Bazar and is heavily congested and has to be reconstructed.
Similarly, the bridge at Thoubal (Thoubal Bridge) and Wangjing is too narrow and have to be
widened. The second phase of the ADB project starts from this place (Figure 13). Road construction
under the ADB project from Kaching to Pallel Bazaar is ongoing. The hill starts from Pallel, and the
bridge at Pallel Bazaar needs replacement. While on the hill between Pallel and Moreh there used to
be seven check posts, now there are only two check posts in operation. The first vehicle check post is
located at Tengnoupal, and the second check post is located at Khudengthabi. At the second check
post, Assam Rifles has introduced a cargo scanner for the goods to be imported through Moreh and
transported to Imphal. Under this project, there is a plan to build a bypass of 2 km in Moreh to avoid
the congested part of the Moreh town. The bypass will connect NH 102 straight to the India–
Myanmar Friendship Bridge. The Imphal–Moreh road connects the ICP at Moreh, which is close to
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the Indo–Myanmar Friendship Road at Gate No.1. The current speed of vehicles is 40 km/hour in the
valley and 20 km/hour on hills. Once the project is completed, the speed will be enhanced to 100
km in the valley and 65 km on hills for passenger vehicles.
5.4 Road Networks between Imphal/Moreh to Major Growth Centres in the NER
In the last 3–4 years, several road connectivity projects have been taken up in the NER under the
Bharatmala project and economic corridor schemes. Under the Bharatmala Pariyojana, a 5,300 km
long road will be developed as a border road and international corridors. Of this, about 2,000 km is
being implemented under Phase 1, which started in October 2017. It is expected that by 2023,
almost 80%–90% of the road connectivity in the NER under Bharatmala Pariyojana will be
completed. It is important to consider the internal connectivity of the northeast to the border town
of Moreh in Manipur. Moreh is connected to Imphal by NH 39. National Highways 36, 37, and 39
connect Imphal with Guwahati, which is the main hub of the NER (Figure 14). The journey from
Imphal to Guwahati at present takes about 12 hours, with many sections of the road being in
disrepair. Another option for travelling from Imphal to Guwahati via Haflong is also being
considered, which is a shorter but more difficult route. Suggestions for upgrading the Imphal–Silchar
road have also considered. In fact, a Detailed Project Report is under preparation for road
connectivity between Imphal and Dimapur. Road connectivity between Imphal and Silchar is good
and the expansion of two small bridges and one large bridge is ongoing. Internal connectivity would
be vital for boosting bilateral links, and considerable attention should be given to this by both the
state and central governments.
Figure 14: Growth Centres in the NER
Source: NHIDCL.
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The NHIDCL has been awarded to complete the construction and maintenance of the National
Highways in the NER. The NHIDCL is also working to improve the roads between Imphal to Kohima
and Imphal to Jiribam. In addition, the NHIDCL is implementing the Aizawl to Tuipang (NH 54) road
connectivity project of about Rs67.21 billion, which is funded by the Japan International Cooperation
Agency (JICA). The project has realigned the existing 250 km and stretches for about 380 km in
length. The project was approved in March 2019 and is being carried out through eight packages. So
far, two packages have been signed, and the rest of the packages have been initiated for signing. The
project is implemented under the Engineering Procurement Construction (EPC) mode through
different contractors.28 There is a possibility of connecting the TLH with the Kaladan Project. Imphal
can be connected with Aizawl by road via Churachandpur and Tipaimukh in Manipur.
There are many challenges: (i) land acquisition and encroachment are the main challenge for
development and highways. Although the land is acquired by the NHIDCL, it requires the support of
respective state governments to take over the land for the road construction project; (ii) unlawful
activities of insurgent groups, particularly between Imphal and Jiribam and between Imphal and
Dimapur; (iii) high replacement costs of standing structure/horticulture/ forest land; and (iv) lack of
cooperation from state line departments.
5.5 Imphal–Mandalay Bus Service
The proposed bus service is expected to take 14 hours to cover the 579 km distance between Imphal
and Mandalay. The initial proposal for the bus service was submitted to the Ministry of Road
Transport and Highways and the Ministry of Development of North Eastern Region (MDoNER) in
2009. The Imphal–Moreh section of the road is about 110 km, while the section from Moreh to
Mandalay is about 469 km. The MoU for the bus service between India and Myanmar was amended
in 2012, and in 2014, a technical committee meeting was held for the second time. A joint special
team by members of both countries was formed, and it was found that the road between Imphal to
Moreh is in good condition, but the route from Moreh to Yargi is not in good condition. There are
three routes proposed for the bus service, of which the second route is not usable during the rainy
season, whereas in the first route, there are about 70 bridges in the Yargi–Kalewa section that need
repair.29 In 2014, Route 1 from the three options was finalised, and the service was expected to
begin in 2019.30 Finally, an MoU was signed between Yangon-based Shwemandalar Express and
Imphal-based Seven Sisters Holiday on 14 February 2020 for the commencement of a bus service
between the two neighbouring countries by April 2020.31 According to the MoU, the Shwe Mandalar
Express will provide service from Mandalay to the border town of Tamu in Chin State, and Seven
Sister Holidays will provide service from Tamu to Moreh and Imphal. The journey from Mandalay to
Tamu will take about 11 hours, while the Tamu to Imphal journey may take about 2 hours and about
an hour for security clearances at Tamu–Moreh, making a total 14-hour trip. Once the road repairs
are completed in India and Myanmar, the trip from Mandalay to Imphal will take only 5 hours.32 Tour
28 Letter of Agreement (LoA) issued for seven phases in the EPC mode: one package for Gammon; three packages for ABCI; two packages for Bhartya; and one package for the National Project Construction and Cooperation (NPCC). 29 See Chaudhury and Basu (2015). 30 Ibid. 31 See Myanmar Times (2020). 32 Quoted in Myanmar Times (2020).
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operators in Imphal have suggested that following Dhaka–Kolkata or Agartala–Kolkata bus services,
immigration and check-in should be done on an end-to-end basis, which will drastically reduce the
commuting time between the two cities.
5.6 Rail Connectivity
Establishing rail connectivity with Myanmar is important both in terms of increasing bilateral
commerce and improving people-to-people contact. Rail links will significantly reduce journey times,
especially for longer-distance cargoes and passengers. The study for a rail link from Jiribam in
Manipur to Mandalay in Myanmar was conducted by Rail India Technical and Economic Service
(RITES) in 2005. According to the study, the total length of rail line from Jiribam to Mandalay is 885.4
km, out of which the length of the Jiribam–Imphal–Moreh route is 219 km, and the length of Tamu–
Kalay route is 127.4 km. This rail project is part of the southern corridor of the Trans-Asian Railway
network.
Within India, there is no rail link between Jiribam and Moreh, while on the Myanmar side, there is
also no link between Tamu and Kalay. Connectivity between these points in the respective countries
would contribute to increasing communication and commerce. The Jiribam–Tupul–Imphal broad
gauge line is expected to be completed by 2020. The route involves several minor and major bridges
and tunnels, of which a special feature is the construction of Bridge No.164, which has a pier height
of 141 metres and is the tallest girder rail bridge in the world.33 Initial survey work on a broad gauge
rail link between Imphal and Moreh was already completed by the North East Frontier Railway.34
International bodies like the JICA and the Korea International Cooperation Agency have shown
interest in improving the railway system in Myanmar.
5.7 Air Connectivity
Air connectivity between India and Myanmar needs to be improved to promote religious and
medical tourism. For instance, people from Myanmar are interested in visiting Bodh Gaya. The
present air connectivity is a direct flight from Kolkata to Yangon and between New Delhi to Yangon
via Gaya. During the months of October to March every year, Myanmar Airways and another
privately operated service, the Myanmar Golden Airlines, operate flights thrice a week from Yangon
to Gaya for the Buddhist pilgrimage in Myanmar.35 Myanmar Airlines is slated to begin a new flight
on the Kolkata–Bodh Gaya–Yangon route, mainly targeting religious tourism. The Indian diaspora is
concentrated mainly in Yangon and Mandalay and employed in various fields like education, trade
and commerce, and civil services. Many families are engaged in trading businesses and have families
in India and Myanmar. Indigo has recently started daily flights between Kolkata and Yangon.
Air connectivity will play an important role in fostering multi-modal connectivity in the region.
According to an RIS Study, ‘with Imphal now becoming an international airport, it will be important
to include it as an option in the Bilateral Air Services Agreement to enable airline companies to
consider operating flights between Imphal and Mandalay. Likewise, by the time the Zokhawthar
border trade point begins to show greater levels of activity and the Rhi–Tiddim road gets going,
33 See Financial Express (2018). 34 See Chaudhury and Basu (2015). 35 See Myanmar Times (2019).
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flights from Aizawl to Kalemyo and Mandalay would help in further promoting trade. It has already
been indicated that the Myanmar government would be further strengthening the Kalemyo
airport.’36
There are no flights between Imphal and Mandalay or Imphal and Yangon. There are nine flights
between Mandalay and Yangon. It is possible to connect Imphal with Mandalay and Imphal with
Yangon by air, and there was a trial run in the past. Air KBZ and KB Enterprises are likely to start
Imphal to Mandalay flights. The Government of India may consider extending the E-visa to Myanmar
citizens for coming to India through Moreh and Tamu. In addition, a Visa Collection Centre may be
set up at Moreh and Tamu. Direct air connectivity between Imphal and Mandalay is likely to be
started soon.
5.8 Digital Connectivity
Myanmar has set up cross-border fibre optic links with many of its neighbouring countries,
including India. The first cross-border fibre optic link between India and Myanmar was set
up in February 2009, running from Moreh in Manipur to Mandalay in Myanmar, for a distance of 500
km. The 640-km-long link passes through Tamu, Kampatwa, Kyi Gone, Shwebo, Monywa, and
Sagaing. The optical fibre link is a high-speed broadband link for voice and data transmission.37
5.9 Trade Facilitation, Cooperation on the Trilateral Motor Vehicle Agreement, and Technical
Assistance
The Trilateral Motor Vehicle Agreement (MVA) is crucial for the TLH. In particular, the TLH MVA is
important for facilitating trade, economic cooperation, and people-to-people contact through
enhanced regional connectivity, including through the facilitation of regional cross-border road
transport. Without the MVA, the TLH will be non-operational. In general, the MVA protocols allow
the safe and secure movement of vehicles along the TLH. Three countries have to reach consensus
and reaffirm their understanding that the TLH MVA safeguards the rights and obligations of all
parties under other international agreements (e.g. the World Trade Organization (WTO) Trade
Facilitation Agreement) and bilateral/regional agreements within the group. However, the reality is
that progress in the negotiation of the MVA between India, Myanmar, and Thailand for the TLH has
been slow.
36 See RIS (2014: 42). 37 See Global Times website (www.globaltimes.com).
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Table 11: World Trade Organization Trade Facilitation Agreement
Country Ratified Notified on
Category A % Category B % Category C %
India 22 April
2016
23 March
2016 72
23 January
2017 28 - 0
Myanmar
16
December
2015
27 February
2018 6
27 February
2018 9
27 February
2018 85
Thailand 5 October
2015 25 July 2014 92 24 May 2017 8 - 0
Notes: Developing and LDC members can request more time and capacity-building support to implement the agreement. To benefit from these flexibilities, they must designate all measures into categories A, B and/or C, which have the following implementation timings: Category A = Developing Members will implement the measure by 22 February 2017 and LDCs by 22 February 2018; Category B = Members will need additional time to implement the measure; Category C = Members will need additional time and capacity-building support to implement the measure. Source: www.tfadatabase.org.
The objective of trade facilitation at the Moreh border should be to transform the cross-border
clearance ecosystem through efficient, transparent, risk-based, coordinated, digital, seamless, and
technology-driven procedures that are supported by state-of-the-art land border crossings, roads,
and other logistics infrastructure; and also to bring down the overall cargo release time.38 While
India and Thailand have opted for Category A of the WTO TFA (Table 11), Myanmar selected
Category C, thereby indicating that it needs additional time and capacity-building support. Given that
all three TLH countries have ratified the WTO TFA, they may resume the MVA negotiations at the
earliest possibility and complete the negotiations before the TLH comes into operation. In many
areas, the WTO TFA and TLH MVA are interrelated. Myanmar’s progress in implementing the WTO
TFA has been slow. Myanmar needs technical assistance and capacity building while implementing
the WTO FTA. Both India and Thailand shall offer adequate technical assistance and capacity building
to Myanmar while implementing the TLH MVA. The technical assistance to Myanmar will also serve
the WTO TFA obligations. To effectively implement the technical assistance, India’s National
Committee for Trade Facilitation may be engaged to design an appropriate strategy for technical
assistance.
38 See the Vision Report, CBIC, Government of India.
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6. Illustration of the Developmental Impacts of the Trilateral Highway on
Northeast India
6.1 Benefiting from Trade–Development Linkages
The extension of the Trilateral Highway (TLH) to Cambodia, the Lao PDR, and Viet Nam may further
strengthen road connectivity between the NER states and Southeast Asian countries. The
operationalisation of the TLH will have an immediate impact on businesses and commercial
activities in the Moreh–Tamu area at the India–Myanmar border as a spin-off of the improved
connectivity, and, hence, faster transportation of goods between Moreh and Imphal on the Indian
side of the border and subsequently to the Myanmar side. As a result of the reduced cost of
transportation and faster processing of documents at the ICP Moreh, Indian exports to Myanmar,
Thailand, and other countries are likely to increase. Increased trade between India and the
Southeast Asian countries would propel economic activities along the TLH. The trade-induced rise
in business in Moreh–Imphal has the strong potential to generate a centripetal force around
Imphal and attract exports from other parts of the NER, which is possible because of notable
progress in rail connectivity in the NER connecting all the capitals of the NER states. This spurt in
commercial activity would then require improved supply chains and the strengthening of existing
corridors in the region. Moreh could become a critical node in the growth corridor that has been
emerging with the TLH and its possible extension to Mekong countries.
6.2 Leveraging the Growth Corridor Advantage
The larger developmental gains from the TLH and its extension to the Mekong subregion can be
visualised from the growth corridor perspective. In a growth corridor, connectivity facilitates the
integration of urban centres/growth centres/nodes with the hinterland/less-developed areas.
Connectivity-led integration in the form of a growth corridor has the potential to expand economic
activities along the Moreh–Imphal zone. Very often, local industrialisation, especially SMEs, is
affected due to a lack of technical know-how, uncertainty of markets, and lack of scale. Rural
markets in most cases are fragmented and thereby offer little scope for the growth and
diversification of local businesses. Therefore, improved and faster connectivity may unleash new
dynamism in the rural economy in the NER. It may generate wider economic benefits through new
enterprises, jobs, and greater inclusion. However, to gain such welfare, countries have to invest in
transport, agriculture, tourism, energy, urban development, and other multi-sector/border zone
development.
6.3 Gaining from the Trade–Industry Linkages
The most immediate impact anticipated from the operationalisation of the TLH is the rise in bilateral
trade amongst the partner countries. Once export possibilities increase, it would be cost-effective
for the exporters in Manipur and other states in the NER to use the land corridor to trade with
Myanmar and other Southeast Asian countries. Sagaing Province of Myanmar is a big market for
Indian goods. Along with higher exports, the TLH may generate a conducive business environment
for the growth of industries in the NER. This is based on the logic that local firms in the NER would
not only be able to export to Southeast Asian countries and beyond without the hassle of
transporting goods to ports and waiting long for meeting formalities and customs clearances but
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also to source raw materials and intermediates from the neighbouring countries at cheaper prices. In
view of such a scenario, a strong case for trade-induced industrialisation is being visualised in the
NER. To assess the potential of the industrialisation that could be attributed to the TLH, it is
imperative to examine the trends and patterns in industrialisation in the NER states.
6.4 Sectors Offering Business Opportunities
The sector that is significant for the NER states is the food processing industry. The NER is known for
agriculture and horticulture crops, including organic farming. In recent years, the region has
witnessed significant growth in the production of fruits, spices, and plantation crops. Amongst the
NER states, Assam and Tripura have more units in food processing than other states.39 There are
several challenges that food processing industries face in the NER, including a lack of transportation,
inadequate cold storage facilities, lack of post-harvest technologies and processing of farm produce,
lack of market access, and other factors.40
The central and state governments have implemented several schemes for the promotion and
development of food processing industries in the NER. The schemes cover an entire spectrum of
issues, such as food parks, cold chain, value addition and preservation infrastructure, food testing
laboratories, research and development, and the modernisation of food processing industries. The
number of projects sanctioned under two schemes, the National Mission on Food Processing and
Technology Upgradation and Modernization of Food Processing Industries schemes are higher than
other schemes. For instance, there are only one or a few projects under the Mega Food Parks
scheme, Integrated Cold Chain, Value Addition & Preservation Infrastructure and Research &
Development for all the northeastern states, except for 19 projects for Assam under the Research &
Development scheme.41
In terms of the potential for industrial development, the NER is well-endowed with natural resources.
In particular, the rich mineral resources of the northeastern states can be harnessed properly for
planned industrial development in the region. The mineral resources in the NER include coal,
limestone, petroleum, natural gas, chromite, zinc, lead, copper, iron ore, and others.
In view of a possible spurt in economic activity post-implementation of the TLH extension, a number
of steps can be taken to promote industrial development in the NER. Manipur State could develop
Special Economic Zones (SEZs) for timber, food processing, and other sectors. For the ease of
payments and settlements in bilateral trade, normal banking facilities between Myanmar and
Manipur should be opened. Some of the sectors having high business potential in Manipur are health
care, education, tourism, infrastructure development, construction, and food processing.
The business opportunities are likely to trickle down to the entire NER through better connectivity
and business marketing. There is a possibility of connecting the TLH with the Kaladan Project and
Imphal with Aizawl by road via Churachandpur and Tipaimukh in Manipur. This would perhaps boost
industrial development in the neighbouring states, such as Mizoram, Assam, and Tripura.
39 Based on NEC (2019). 40 See Rais et al. (2014) and Kathuria and Mathur (2019). 41 Based on NEC (2019).
B1-34
In addition, the industrial units in and around Imphal have witnessed significant growth and have the
potential to grow further. The industrial units broadly cover sectors such as garment making,
